Mintel recently identified five key macro factors that it thinks will have a significant effect on the packaging industry in 2023. In a wide-ranging conversation with Benjamin Punchard, Global Packaging Insights Director at Mintel, we unpacked these issues and their potential effects on the packaging ecosystem.
In a recent trend report, Mintel highlighted a number of macro factors that it predicts will affect the packaging industry in 2023. In your view, which of these will prove to be the most significant, and why?
The macro factor that will have the biggest impact, both in size and in reach, will be the continued legislative push towards sustainable packaging solutions. The interventions include the growing implementation of bottle deposit return systems across Europe, and the strengthening of producer responsibility obligations.
Driven by the need for more consistency in recyclate collection, the legislation will drive a shift towards easier-to-recycle pack types and materials. Though this is already a strong direction of travel for the packaging industry, particular categories and pack types (such as soft plastic) have resisted action. It is here that legislation will look to move from nudging brands in the right direction to penalising those who stubbornly remain in hard-to-recycle packaging.
Russia’s invasion of Ukraine and other general geopolitical tension is clearly having, and will continue to have, a shock wave effect on companies within the packaging value chain. Could you unpack this for us?
The conflict in Ukraine has had many varied impacts on material availability across the packaging supply chain. However, it is energy price increases that are causing the greatest concern. Whilst it takes time for brands to invest in the infrastructure to make a pack material switch, increasingly I think we will see brands favouring pack formats and materials with lower energy requirements, and shifting away from those such as steel and glass that have higher energy footprints.
And energy prices are not just an industry concern. Consumers too are looking to reduce their energy use and expecting brands to support them in this endeavour. An example of how this may impact packaging can be seen in food, particularly prepared meals. Here our research shows consumers are switching from ovenable options to microwaveable options, placing pressure on prepared meal brands to avoid trays that are not microwaveable.
A shift to lower energy pack materials also aligns with the continued development of consumer environmental concern. Though plastic (and in particular the threat of plastic pollution) remains of high concern, we have seen that climate change is rapidly rising up the consumer agenda. This has brought carbon emissions into the spotlight, and hence brands are looking to show leadership in carbon footprint reduction. Over the past few years, few brands have wanted to draw attention to their use of plastic, but I think the carbon benefits of this material will increasingly be championed.
While the EU is predicted to have avoided recession in the short term, from the consumer perspective, energy price rises and inflation have led to severe cost of living rises in recent times. How will this affect the packaging industry?
In response to rising inflation, consumers will be interrogating prices, but Mintel predicts that consumers will retain a desire for brands to show positive value, rather than to strip away product value to become the lowest price item on the shelf. Consider also changes in consumer purchase behaviour ongoing from the COVID-19 pandemic, in particular the rise of e-commerce; we are seeing consumers do less frequent shopping trips and more in-home stockpiling.
Bulk purchase has been normalised across Europe to some extent (though it is still not at the levels seen in North America) so I expect to see larger/bulk or multipack offerings taking a bigger role in a brand’s value positioning. Pack size reduction will likely be more about affordable treats (the well-known lipstick effect) rather than specifically about offering a lower price point at the shelf.
In addition, the recognition of the benefits of ambient foods that arose during the pandemic, and the benefit of potentially reduced food waste, will continue to support a reinvigoration of the centre of the store. Packaging that can premiumise in this space, such as openability, transparency and good graphic design will all help brands to stand out and take share.
A secondary effect may be to put the brakes on the momentum of packaging material change. Whilst larger brands will continue to invest in material improvements, and smaller agile companies will be able to make the change to more responsible packaging materials, mid-sized brands may struggle to commit to the significant machinery/infrastructure investments needed to make the change. Packaging companies have an opportunity to become partners in this opportunity gap if they are willing to take on some of the cost, and some of the risk, of these changes.
In David Luttenberger’s words: “Consumers want to know more about the products they buy and the brands that produce them.” What does this mean for companies in the packaging space?
Brands and packaging companies need to recognise that where consumers get information is rapidly changing. Crowding an already busy pack with yet more information no longer works. Going forward packaging companies need to consider how packaging becomes, not the source of information, but a route to connect consumers to their preferred information source; online often via social media.
Already we see brands taking QR codes more seriously, looking to build a link to branded online spaces that give the consumer control rather than just a link to a one-time online gimmick. It may not be QR codes that are the answer to this information evolution, but what is clear is that brands need to build this kind of link to the online space and consider the virtual aspects of their packaging portfolio as an integral part of the innovation funnel rather than looking at this as an extra or add-on.
The EU Commission is set to launch a raft of legislation in the near future that will have a significant impact on how the industry operates. How can companies stay competitive and agile in this context?
We know what is coming; it’s all about recyclability and material responsibility. As such it is possible to some extent to direct current investment to prepare for and mitigate the negative effects of future legislation. However, companies shouldn’t simply be reactive in this context.
There is a wealth of knowledge within the packaging supply chain - from material producers, through converters to brand owners - that can help direct and shape future legislation for the better. Working with industry bodies to provide industry knowledge can help provide the groundwork for stronger legislation, targetted to real-world improvements and measurable environmental gains. I think it is to the credit of the packaging industry that we already see competitors across the entire packaging supply chain working together to build positive change.